"Our target is to bring a smartphone under Rs 1,000. The new smartphone will be a Linux variant and consumers can get 12 months free Internet browsing," Suneet Singh Tuli, chief executive officer of Canada-based DataWind, told ET.

NEW DELHI: Mobile phone and tablet maker DataWind is teaming up with Anil Ambani-owned Reliance Communications (RCom) to launch the world’s most affordable smartphone – priced at Rs 999 – by the end of 2015.

The smartphone will have a Linux-based operating system and will be bundled with RCom’s service offering. It is expected to hit the stores on December 28, the birth anniversary of Reliance founder Dhirubhai Ambani.

“Our target is to bring a smartphone under Rs 1,000. The new smartphone will be a Linux variant and consumers can get 12 months free Internet browsing,” Suneet Singh Tuli, chief executive officer of Canada-based DataWind, told ET.

A smartphone at such a price will be compelling proposition for consumers as they will also get free Internet access for a year along with Facebook, WhatsApp and email services, Tuli said, adding that the company is willing to lose a bit of money on the hardware.

“Our big focus is on network services, apps and content. Hardware today is a customer acquisition tool. Once people start using it, we can make money through service offerings,” the top executive said.

DataWind’s products are designed to primarily offer Internet connectivity options based on 2G mobile-cellular infrastructure.

Tuli said such a low-cost device has been made possible by the sliding prices of processors and weakening memory prices. DataWind is currently in advanced talks with Chinese and Taiwanese chipmakers.

“We want to replace feature phones with low-cost smartphones and hope to shrink the feature phone market base to 5-10% from the existing 60-70% in the next one to two years,” Tuli said.

A spokesperson for RCom said DataWind is a partner and its offerings are available on the telco’s platform. RCom “can’t comment on a specific device,” the spokesperson said.

DataWind and RCom together sell seven variants of Android-based smartphones and tablets, including smartphones PocketSurfer 2G4 and PocketSurfer 3G4 priced at Rs 1,999 and Rs 2,999, respectively, with free Internet for a year. DataWind has sold more than 4 lakh devices through its partnership with RCom in the past six months.

DataWind’s sales in the quarter ended March more than doubled to over 180,000 units, according to a company release. Its net loss widened to $11.6 million in the 12 months ended March 2015 from $4.5 million a year earlier, while revenue climbed 35% to $31.5 million.

Analysts said the partnership is an apparent replication of Reliance’s telecom strategy, which it adopted more than a decade ago with LG and Samsung device makers, and is focused on first-time smartphone users who want to access data with an affordable device.

DataWind has the capacity to produce 5,000 devices a day at its Amritsar production unit and the company is investing Rs 200 crore to set up two manufacturing facilities in south and east India over the next six months. The company also has a tie-up with service provider Telenor to offer affordable devices in six circles with 12-month free Internet access.